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Determining The Right Advertising Budget

Newcomers to online marketing are almost spoiled for choice. A dizzying number of potential advertising channels open up the moment you decide to start building a web presence. The good news: all those options grant flexibility and allow you to test multiple platforms. The bad news: it’s also possible to wind up hemorrhaging money with little to show for it if you invest too much in ill-fitting media.

Determining your ad budget is a crucial first step to any successful campaign. Many businesses allot funds early on, then try to distribute them later. I’m not going to call this a poor first step, but it’s a risky one to take without some idea of cost. Different channels come with different price tags, and it’s vital to have some understanding of what they are.

Social Media

What it is: Utilizing social media platforms (Twitter, Facebook, Instagram etc.) to build a brand presence and attract customers.

What it costs: A social media campaign can cost as little or as much as you’d like it to. It’s certainly possible to set up free accounts with a few different services, then act as manager yourself, but that’s just the tip of the iceberg. To actually figure out how much you’ll be paying, carefully lay out what platforms you’ll be utilizing, if you’ll be paying someone to post content, and if you’ll need to budget for any related expenses, e.g. setting aside stock as a prize for a Twitter contest.

Who can benefit: Anyone. Given how relatively budget-friendly social media is, it’s basically assumed that even the smallest startup will have at least a few active feeds. Choosing which channels to use is up to you. LinkedIn, Facebook, and Twitter are all givens, but more visual brands might want to head for Instagram and Pinterest. Google+ hangouts and up-and-comers like Meerkat or Periscope are awesome if you’d like to speak directly to viewers.

Case Study: A major Twitter offensive helped San Francisco’s Creme Brulee Cart pile up an impressive 12,000 followers in just one year. Tweeting location and special flavors allowed the food cart owners to quickly engage with followers, both encouraging them to have crème brulee on the brain, and telling them where to find it. The kicker? Not a cent was spent on advertising.

PPC Advertising

What it is: The go-to option for budget online marketing. The reason? Click-through rates have plunged for many ad styles; Pay-per-click addresses that problem by requiring companies to pay for only, well, actual clicks. Largely synonymous with big players like Facebook and Google advertising for most.

What it costs: Again, it’s variable, but keep this in mind: an expensive PPC campaign is, by definition, a successful one. Budgets can run from as little as $10/month to six-digit figures.

Who can benefit: Companies with a highly searchable product might want to consider using buying a particular keyword. For example, let’s say you exist in a niche market, and don’t have too many large competitors, but your content still has trouble ranking on Google. A well-chosen bid could provide solid ROI. Just about any company can take advantage of on-site PPC advertising, which can quickly scale in terms of time and capital investment. Thankfully, pricing them beforehand is possible. PPC engines generally allow you to set stringent price limits before launching your ad.

Placed Advertising

What it is: Placed ads are generally run through networks responsible for placing advertising on several different sites. Their actual appearance ranges from simple banner ads to full-background takeovers and video or rich media options.

What it costs: You can generally expect to pay several hundred per month for a static banner ad. Start looking at more exotic options, and cost scales accordingly. Each site or network’s costs will vary, so take quotes from potential partners before you set your budget.

Who can benefit: Companies serving established, well-defined audiences stand to gain the most from placed ads. Products or services that target a very specific demographic can, if placed on the right site, directly reach likely customers. More ambitious campaigns – like, say, Honda’s “Hondastage” concert tour – also do their best when run prominently with specific partners.

Bottom Line

As you may have noticed while reading through, the most common characteristic of online marketing channels is that they have incredibly variable pricing, even within a given medium. The only way to truly set a reliable advertising budget is to get straight to the source.

Don’t get me wrong, there are basic rules to follow. The above sources are ranked in rough order of ascending cost – by and large, that holds true. But the flexibility within each category means that you’ll actually need to set definite costs for social contests, request quotes from advertising networks, and go through a dry run before you ever send content out over a PPC distributor.

I mentioned this earlier: many advertisers start with a set amount of money, then carve up their campaigns to fit. It’s a functional approach, but Procrustean. Instead, if possible, start with the channels. Lay out several potential campaigns, fully explore their costs, and then – only then – should you start to shape your final budget. You’ll wind up with a more accurate estimate, and a more complete plan of attack.

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Great article but one thing I want to include google adwords is must more preferable then any other adwords because the quantity of people working on google is lot more then social media platforms. Also while preparing google adwords one should not go after high CPC but one must increase quality score of the prepared adword.

Surprisingly, gone are the days when social media was truely classified as free source of traffic to our precious website. Today, to be able to generate tangible amount of traffic from social media as a new comer, you must be ready to cough out a huge sum.

And in case, you don’t have the applicable budget, be prepared to spend half of your production time on online with the platform(s) of your choice.

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